2 Important Notice This Summary Plan Description (SPD) booklet, including any subsequent related Summaries of Material Modifications (SMMs), is intended to help you understand the main features of The Prudential Employee Savings Plan ( PESP or the Plan ) applicable to eligible Employees, and to provide information regarding your benefits. This SPD booklet, including any subsequent related SMMs, constitutes the latest SPD of The Prudential Employee Savings Plan. This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of This SPD booklet, including any subsequent related SMMs, is not a substitute for the official Plan Documents, which govern the operation of the Plan. All terms and conditions of this Plan, including your eligibility and any benefits, will be determined pursuant to and are governed by the provisions of the applicable Plan Documents. If there is any discrepancy between the information in this SPD booklet, including any subsequent related SMMs, or in any other Prudential materials relating to this Plan and the actual Plan Documents, or if there is a conflict between information discussed by anyone acting on Prudential s behalf and the actual Plan Documents, the Plan Documents as interpreted by the Plan Administrator in its sole discretion will always govern. Prudential may, in its sole discretion, modify, amend, suspend or terminate any and all of its HR policies, programs, Plans and benefits, including those described in this SPD booklet, including any subsequent related SMMs, in whole or in part, at any time, without notice to or consent of any participant, employee or former employee to the extent permissible under applicable law. Nothing contained in this SPD booklet, including any subsequent related SMMs, is intended to constitute or create a contract of employment, nor shall it constitute or create the right to remain associated with or in the employ of Prudential for any particular period of time. In addition, no oral or written statements made by anyone acting on Prudential s behalf are intended to create the right to remain associated with or in the employ of Prudential for any particular period of time. Employment with Prudential is employment-at-will. This means that either you or Prudential may terminate the employment relationship at any time, with or without cause or notice. The Prudential Employee Savings Plan Page i

3 PESP Highlights The table below summarizes the key features of PESP and tells you where to find more details about these features in this SPD booklet. Plan Feature Description and Where to Find More Information Page Who Can Participate in PESP Generally, all full-time and part-time Employees are eligible to participate in PESP. 4 How to Enroll Your Contributions Company Matching Contributions Changing Your Contribution Rate You may enroll in PESP at any time, starting on your first day of employment with Prudential and your contributions will begin as soon as administratively possible. Automatic Enrollment If you do not affirmatively elect either to participate or to decline participation in PESP within 30 days of hire, you will be enrolled automatically in PESP until you affirmatively elect otherwise. Through your automatic enrollment, you will contribute 4% of your Eligible Earnings on a before-tax basis, subject to Internal Revenue Code limitations. Please note that you can stop these contributions at any time, or change your rate of contribution at any time. These Before-Tax Contributions and all related investment results are invested in the Plan s default investment option, also known as the Qualified Default Investment Alternative (described in Investing Your Contributions below). Before-Tax, Roth 401(k) and/or After-Tax Contributions: You may contribute any whole percentage from 1% to 50% of your Eligible Earnings on a before-tax, Roth 401(k) and/or after-tax basis, subject to Internal Revenue Code limitations, provided the total of your Before-Tax, Roth 401(k) and/or After-Tax Contributions does not exceed a combined maximum rate of 50% of your Eligible Earnings. Catch-Up Contributions: If you reach age 50 or older during the year and if you expect to reach one or more of the contribution limits under the Plan for that year, you may be eligible to make additional Before-Tax and Roth 401(k) Catch-Up Contributions to PESP during that Calendar Year, subject to Internal Revenue Code limitations. Rollover Contributions: You also may be able to make Rollover Contributions of certain cash distributions into PESP from an Individual Retirement Account (IRA) or another Tax-Qualified Plan. Beginning with the first pay period after your one-year anniversary with Prudential, the Company matches 100% of your Before-Tax and Roth 401(k) Contributions to PESP (other than your Catch-Up Contributions), up to a combined maximum of 4% of your Eligible Earnings for that period (subject to Internal Revenue Code limitations). You may change your Before-Tax, Roth 401(k) and/or After-Tax Contributions rate to any whole percentage from 0% to 50% at any time, subject to Internal Revenue Code limitations. The Contribution Accelerator Program If you contribute from 1% to 14% on a before-tax or Roth 401(k) basis, you will be automatically enrolled in the Contribution Accelerator Program. Your contribution rate will automatically be increased by 1% as soon as administratively feasible following each April 1, up to a maximum of 15%. You have a right to elect not to participate, or to participate at a different percentage, at any time The Prudential Employee Savings Plan Page ii

4 Plan Feature Description and Where to Find More Information Page When You Become Vested Investing Your Contributions How Company Matching Contributions Are Invested Accessing Your Accounts While You Are Working at Prudential When Your Prudential Employment Ends You are always fully Vested in your Before-Tax Contributions, Roth 401(k) Contributions, Catch-Up Contributions, After-Tax Contributions, Rollover Contributions (if any) and any related investment results on all those contributions. Generally, you become Vested in your Company Matching Contributions and any related investment results if, while employed by Prudential, you complete three years of Vesting Service, reach age 65, die or begin receiving long term disability benefits under The Prudential Welfare Benefits Plan. PESP offers a wide range of investment options that include a guaranteed investment account, mutual funds, separate accounts, Prudential Financial, Inc. (PFI) common stock and a guaranteed retirement income product. You have a choice of selecting your own mix of investments for your PESP account or enrolling in GoalMaker through which you can select a model portfolio with a pre-determined mix of investments based on your risk tolerance and your anticipated retirement date. Qualified Default Investment Alternative (QDIA) If you are automatically enrolled or you do not make an investment election, your contributions will be invested in the Qualified Default Investment Alternative (QDIA) until you make a different investment choice. The QDIA is the Conservative GoalMaker Portfolio appropriate for you, based on your age and the number of years until you reach age 65. One-half of Company Matching Contributions will be invested automatically in the PFI Common Stock Fund. The remainder of your future Company Matching Contributions will be invested according to your current investment allocation selections (or to the GoalMaker portfolio designated as your Qualified Default Investment Alternative if you did not specify how your contributions are to be allocated). PESP is designed primarily to encourage long-term savings for your retirement. However, if you need to access some of your PESP savings during your employment with Prudential and its Affiliates, you can request a loan or a withdrawal from your PESP account, according to the rules of the Plan. When your employment at Prudential and all its Affiliates ends, if your Vested PESP account is: $1,000 or less, and you do not elect another form of payment and you do not elect to roll it over to another qualified plan, it will be automatically distributed in a lump sum cash payment, less applicable tax withholding. Greater than $1,000, but is not more than $5,000, your Vested account balance will be rolled over to an IRA and/or Roth IRA (if applicable) designated by the Plan, unless you elect otherwise. Greater than $5,000 (or such higher amount as may be permitted under applicable law), you may defer distribution until a later date or choose how to receive a full or partial distribution. Please note: If you are age 65 or older at the time your distribution is made and you do not make a timely distribution election, your account will not be rolled over automatically to an IRA; instead, your account will be distributed to you in a lump sum cash payment (Loans) 56 (Withdrawals) 61 The Prudential Employee Savings Plan Page iii

7 Maximum Contributions Limit Maximum Eligible Earnings Highly Compensated Employees Suspension of Before-Tax, Roth 401(k) and After-Tax Contributions Roth In-Plan Conversions Who Is Eligible to Convert Accounts You Can Convert Important Considerations General Tax Consequences of a Roth In-Plan Conversion For More Information Status of Your PESP Account During an Approved Leave of Absence Qualified Military Service PESP Contributions PESP Loans PESP Distributions If You Die While Performing Qualified Military Service Non-Military Leaves of Absence If You Are on a Paid Leave of Absence If You Are on an Unpaid Leave of Absence PESP Contributions PESP Loans Vesting Vesting Service When You Become Vested Period of Separation Forfeitures Investing Your PESP Account Qualified Default Investment Alternative (QDIA) Your Investment Choices GoalMaker What Type of Investor Are You? Model Portfolios Automatic Rebalancing For Enrollment and More Information Investment Options Performance of Investment Options The Prudential Employee Savings Plan Page vi

10 Claims and Appeals Procedures Making a Claim How to File a Claim What Information to Include in a Claim When to File a Claim Notice of Adverse Benefit Determination How to Appeal an Adverse Benefit Determination What Information to Include in Your Appeal Administrative Committee Consideration When You Can Expect a Response Legal Action Statement of ERISA Rights Your Rights Receive Information About Your Plan Prudent Actions by Plan Fiduciaries Enforce Your Rights Assistance with Your Questions Service of Legal Process Glossary Appendix A Company Demutualization Distribution of Value Allocations Appendix B The Katrina Emergency Tax Relief Act of 2005 and The Gulf Opportunity Zone Act of Who Was Eligible Loans Distributions and Withdrawals Tax Treatment Repayment of Qualified Hurricane Distributions The Prudential Employee Savings Plan Page ix

11 Introduction Throughout this SPD booklet, you will see terms whose first letters are capitalized. When you see these terms, you can check the Glossary at the back for detailed definitions and how the definitions apply to the benefits described in the SPD booklet. The Prudential Employee Savings Plan ( PESP or the Plan ) gives you the opportunity to save money and take advantage of savings and investment options that, in general, may not otherwise be available to you. This PESP Summary Plan Description (SPD) booklet: Introduces you to the Plan; Reviews its benefits; Provides you with information to help you decide whether and how much you may want to invest in your future through PESP; and Shows you why it is important to save and gives you the information you need to start planning for your financial future through PESP. For ease of reference, most capitalized terms are defined in the Glossary, beginning on page 82. Please note that this PESP SPD booklet describes the provisions in effect as of June 30, 2012, including changes made through that date, and applies to all eligible Prudential Employees. One of the advantages PESP offers is the opportunity to make Before-Tax, Roth 401(k) and/or After-Tax Contributions, up to a maximum of 50% of your Eligible Earnings, subject to Internal Revenue Code limitations. In addition, Prudential generally matches 100% of your Before-Tax, and/or Roth 401(k) Contributions (but not Catch-Up Contributions), up to a maximum of 4% of your Eligible Earnings, subject to Internal Revenue Code limitations. Your Before-Tax Contributions, before-tax Catch-Up Contributions, Company Matching Contributions, Rollover Contributions and any investment results generated by your total PESP account balance are generally not taxed until distributed from the Plan. Additionally, investment earnings on Roth 401(k) Contributions are not taxed when distributed, as long as the distribution is considered qualified. (See Advantages of Roth 401(k) Contributions beginning on page 50 for more information.) Another advantage of a plan like PESP is the opportunity to invest your contributions, the Company Matching Contributions and all investment results in a range of investment options. You can choose to invest the money in your PESP account among the available investment options in any combination that suits your personal investment goals. There may be restrictions on some transactions, as described throughout this PESP SPD booklet. The Prudential Employee Savings Plan Page 1

12 How to Contact Prudential Retirement Throughout this Summary Plan Description (SPD) booklet, you will see references to Prudential Retirement, which is your primary resource for information about PESP. You can reach Prudential Retirement online (through Pru Today or at or by telephone. To check your account balance, transfer funds or perform certain transactions, you have access to your PESP account 24 hours a day, seven days a week. Simply choose whichever method is most convenient for you and follow the instructions below. Online Access The PESP website (Prudential Retirement online) is available via the Internet and the Prudential intranet. Via the Internet Visit the PESP website (at enter your User ID and password in the spaces provided, then click LOG IN. If you are signing on for the first time, click REGISTER NOW and follow the instructions to establish your User ID and password. Via the Prudential Intranet Go to Pru Today and click on the My Prudential tab; Under My Life, click Prudential Employee Savings Plan (PESP) ; On the next page, click LOGIN PESP Online from the right-hand side of the page; and Enter your User ID and password in the spaces provided, then click LOG IN. If you are signing on for the first time, click REGISTER NOW and follow the instructions to establish your User ID and password. Viewing This SPD Booklet Online You can review an online version of the PESP SPD booklet via the Prudential Intranet using the following instructions: Go to PRU Today and click on the My Prudential tab; Under My Life, click Prudential Employee Savings Plan (PESP) ; and On the next page, click PESP Summary Plan Description from the right-hand side of the page to view the SPD booklet. Telephone Access Call PRU-PESP ( ) and follow these steps: Follow the prompts for Automated System; When prompted, enter your Social Security number; and When prompted, enter your PESP/Prudential PIN. The system will speak your total account balance. The first time you use the IVR system, your PESP/Prudential PIN will be your six-digit date of birth (mmddyy). After you enter your six-digit date of birth, you will be prompted to change your PIN. If, after you ve changed your PIN, you forget your PIN, call PRU-PESP ( ). The Prudential Employee Savings Plan Page 2

13 To speak to a Prudential Retirement Customer Service Representative, call PRU-PESP ( ) and follow the instructions to speak to a Prudential Retirement Customer Service Representative. Customer Service Representatives are available from 8 a.m. until 9 p.m., Eastern time, Monday through Friday (except holidays). If you are hearing-impaired and have a teletype (TTY) line, call , Monday through Friday (except holidays), 8 a.m. to 6 p.m., Eastern time. Or, you may call PRU-EASY ( ) and follow the prompts for Pension and Savings, then 401(k) to proceed to your PESP account information. Please note: If you are a former Employee, please follow the prompts for Pension and Savings, then Employee Savings Plan. Mail Access The mailing address for submitting PESP forms and any written correspondence is: Prudential Retirement PESP Team 30 Scranton Office Park Scranton, PA Terms and Conditions When you use the PESP website or IVR system, you are agreeing to use them under the terms and conditions prescribed by the Company. These terms and conditions are maintained on the PESP website for easy reference. Or, to obtain a copy, call Prudential Retirement at PRU-PESP ( ). The Prudential Employee Savings Plan Page 3

14 Joining PESP Who Is Eligible Generally, you are eligible to participate in PESP if you are a full-time or part-time Employee of Prudential. Who Is Not Eligible Generally, you are not eligible to participate in PESP if you are: A non-resident alien with no earned income from sources within the United States; Employed by an Affiliate that does not participate in the Plan; Deemed to be an Employee under Section 530 of the Revenue Act of 1978 (for example, state dental directors and dental consultants); An International Employee, compensated in a currency other than U.S. dollars; A student intern; An Agency Distribution Financial Professional Emeritus, Agent Emeritus, Premier Retired Representative or Retired Representative, as to new contributions after entering these categories; An independent contractor; An individual service provider compensated through an employee leasing company, temporary employment agency or other third-party agency; An individual who would be treated as an employee solely by reason of such individual being treated as either part of an affiliated service group or a leased employee under the Internal Revenue Code and regulations; Any other individual who performs service for Prudential but is not treated as an Employee for federal tax purposes at the time the individual renders services; or Included in a collective bargaining unit, unless the collective bargaining agreement specifically provides for participation in the Plan. When You Are Eligible to Enroll and Automatic Enrollment You may enroll in PESP at any time, starting on your first day of employment with Prudential. If you were hired prior to January 1, 2001, you can choose whether or not to contribute to PESP at any time. If you do not affirmatively elect to participate in PESP, you will not be enrolled automatically in the Plan. If you were hired on or after January 1, 2001, and you do not affirmatively elect either to participate or to decline participation in PESP within 30 days of hire, you will be enrolled automatically in PESP until you affirmatively elect otherwise. Through your automatic enrollment, you will contribute 4% of your Eligible Earnings on a before-tax basis, subject to Internal Revenue Code limitations. Please note that you can stop these contributions at any time, or change your rate of contribution at any time. These Before-Tax Contributions and all related investment results are invested in the Plan s default investment option, also known as the Qualified Default Investment Alternative (QDIA), unless you specify otherwise. The Plan s QDIA is the Conservative GoalMaker Portfolio appropriate for your current age and the number of years remaining until you reach age 65. This means that any contributions made through automatic enrollment (and related investment results), unless you specify otherwise, will The Prudential Employee Savings Plan Page 4

15 automatically be defaulted to the GoalMaker portfolio designated as your QDIA. See Qualified Default Investment Alternative (QDIA) on page 26 for more information about the QDIA. Additionally, you will be enrolled automatically in the Contribution Accelerator Program, which increases your Before-Tax Contribution amount as soon as administratively feasible following each April 1 in increments of 1%. (See The Contribution Accelerator Program on page 12 for information.) Once your automatic enrollment occurs and within 90 days of your first automatic contribution, you may elect to stop participating in PESP and request a distribution of all contributions without incurring a 10% Federal early distribution tax. Your returned amounts are includible in income in the year in which they are returned. If you are eligible to receive Company Matching Contributions, one-half of your Company Matching Contributions (and related investment results) your Company Matching Contributions Account 1 will be invested in the GoalMaker portfolio designated as your QDIA, unless you specify otherwise. The other one-half of Company Matching Contributions (and related investment results) your Company Matching Contributions Account 2 will be invested initially in the non-employee Stock Ownership Plan (ESOP) portion of the Prudential Financial, Inc. (PFI) Common Stock Fund. (See Who Is Eligible to Receive Company Matching Contributions on page 11 for more information about eligibility to receive Company Matching Contributions.) Once enrolled, you may elect to increase, decrease or stop your contributions and/or change your investment options at any time. Although your Company Matching Contributions are invested automatically in the QDIA and the PFI Common Stock Fund, you can redirect these funds to other investment options described in the section on Investing Your PESP Account beginning on page 26. Please note: If you were automatically enrolled in PESP before December 24, 2007, the default investment option for contributions (and related investment results) made before that date was the PESP Fixed Rate Fund. Default contributions made before December 24, 2007, remain in the PESP Fixed Rate Fund. How to Enroll If you have never contributed to PESP, you can change your contribution percentage or enroll online or by telephone at any time. (See Performing Transactions on page 73 for more information.) Your enrollment will be processed and your contributions will be deducted from your paycheck as soon as administratively practicable. Naming a Beneficiary(ies) When you enroll in the Plan, you will need to designate a Beneficiary(ies) the person(s) or entity(ies) to whom your PESP account balance will be paid if you die before your PESP account balance is fully paid out to you. If you are: Single, you may name anyone you wish as your Beneficiary(ies), and generally, you may change your Beneficiary(ies) at any time. If you do not complete a PESP Beneficiary Designation Form or an online Beneficiary designation, if you do not complete the designation correctly or if all your Beneficiaries die before you do, your Beneficiary automatically will be your estate. Married (or get married while a PESP participant), your surviving Spouse at your death is automatically your Beneficiary, as required by law. If you want to name someone other than your Spouse as your Primary Beneficiary, you must complete a PESP Beneficiary Designation Form and have the form signed by your Spouse and notarized. You cannot use the online feature. If you do not complete a PESP Beneficiary Designation Form or an online Beneficiary designation, if you do not complete the information correctly or if your Spouse on the date of your death never consented, benefits automatically will go to your surviving Spouse. If your Spouse and/or all your Beneficiaries die before you do, your Beneficiary automatically will be your estate. The Prudential Employee Savings Plan Page 5

16 Generally, you may designate or change your PESP Beneficiary at any time either online or via form. For online Beneficiary designations, access the PESP website (at To request a PESP Beneficiary Designation Form, call PRU-PESP ( ). Your PESP Beneficiary Designation Form should be returned to the Prudential Retirement PESP Team via: U.S. Mail Prudential Retirement PESP Team 30 Scranton Office Park Scranton, PA Fax Prudential Retirement PESP Team You should keep a copy of your completed PESP Beneficiary Designation Form with other important papers regarding your estate. In certain rare and extraordinary circumstances, where you are unable to fill out a PESP Beneficiary Designation Form or access the online system, but you have provided another written request that clearly states your intent to designate or change your Beneficiary, the Plan Administrator will follow your instructions. Note that special provisions may apply to a Beneficiary designation if a participant is killed by a person who would otherwise receive benefits under this Plan as a Beneficiary of the participant, depending on the law of the state, territory or other governmental subdivision in which such participant resided immediately prior to his/her death. In this case, if such law provides that the person responsible for the death of the participant is treated as predeceasing the participant or otherwise ineligible to receive a benefit from the Plan, then the Administrative Committee, provided that it has knowledge of these circumstances, shall ensure that the person responsible for the death of the participant shall not receive benefits under the Plan. In some cases, there may be no benefit payable. The Prudential Employee Savings Plan Page 6

17 Contributions to PESP Your Contributions You can make Before-Tax, Roth 401(k) and/or After-Tax Contributions to PESP while you remain employed by Prudential. Please note: If your separation from employment with Prudential is covered by the Worker Adjustment and Retraining Notification Act (the WARN Act ), Prudential will provide you with a notice that the WARN Act applies. If the WARN Act applies to your separation from employment, you may continue to make contributions to PESP until your separation date as indicated in the notice, even if you are not expected to return to work following your leave. Your Before-Tax Contributions You may contribute any whole percentage from 1% to 50% of your Eligible Earnings on a before-tax basis, subject to Internal Revenue Code limitations. If you choose to make Before-Tax, Roth 401(k) and/or After-Tax Contributions, the most you can contribute is a combined maximum rate of 50% of your Eligible Earnings, subject to Internal Revenue Code limitations. (See Your Catch-Up Contributions below to see if you are eligible to make additional Before-Tax Contributions.) When you make Before-Tax Contributions, your contributions are deducted before federal income taxes (and, in most cases, state and local income taxes) are paid. You will not pay these income taxes on your Before-Tax Contributions or any related investment results until you receive distributions from PESP. (See Advantages of Before-Tax Contributions beginning on page 48 for more information.) Your Roth 401(k) Contributions You may make Roth 401(k) Contributions in any whole percentage from 1% to 50% of your Eligible Earnings, subject to Internal Revenue Code limitations. If you choose to make Before-Tax, Roth 401(k) and/or After-Tax Contributions, the most you can contribute is a combined maximum rate of 50% of your Eligible Earnings, subject to Internal Revenue Code limitations. When you make Roth 401(k) Contributions to PESP, your contributions are made with money that has already been taxed. Therefore, you will not pay federal income taxes on your Roth 401(k) Contributions when they are distributed to you. Additionally, you will not pay federal income taxes when you take a distribution of any related investment results from your Roth 401(k) Contributions Account, provided your distribution meets the requirements for a Qualified Roth Distribution. (See Special Rules Applicable to Roth 401(k) Contributions beginning on page 70.) If your distribution is not a Qualified Roth Distribution, you will pay income taxes on any related investment results from your Roth 401(k) Contributions Account. Your Catch-Up Contributions If you reach age 50 or older during the year and if you expect to reach one or more of the contribution limits listed below for that year, you may be eligible to make additional Before-Tax and Roth 401(k) Catch-Up Contributions to PESP during that Calendar Year; contributions may begin at any time during the year you are eligible. Participants eligible for Catch-Up Contributions must reasonably expect to exceed one of the following PESP annual limits during the year they would like to make Catch-Up Contributions: Before-Tax and Roth 401(k) Contributions limit ($17,000 for 2012); Maximum contribution limit ($50,000 for 2012), includes Before-Tax, Roth 401(k), After-Tax and Company Matching Contributions; PESP contributions limit of 50% of Eligible Earnings in any combination of Before-Tax, Roth 401(k) and/or After-Tax Contributions; or The Prudential Employee Savings Plan Page 7

18 If you are a Highly Compensated Employee as defined in the Internal Revenue Code, you have a lower contribution limit. For 2012, Highly Compensated Employees may contribute up to 15% of Eligible Earnings on a before-tax and Roth 401(k) basis (see Highly Compensated Employees beginning on page 17 for more information). These rates are subject to change annually. For more information on Plan and Internal Revenue Code limits, please see Limits on Contributions beginning on page 13. Catch-Up Contributions are not eligible for Company Matching Contributions. You may elect any whole percentage from 1% to 100% of your Eligible Earnings to be deducted from each paycheck up to the maximum permitted by federal law (the maximum limit is $5,500 for 2012). Catch-Up Contributions are credited to your Before-Tax Contributions Account and/or your Roth 401(k) Contributions Account (as applicable) along with your other Before-Tax Contributions and/or Roth 401(k) Contributions. Your Catch-Up Contributions will be allocated to the same investments you have chosen for your regular Before-Tax and/or Roth 401(k) Contributions. Catch-Up Contributions will be processed and payroll deductions will begin as soon as administratively practicable after you make your election. The per-paycheck percentage that you elect in any year automatically will be carried into the next year and will be deducted from each of your paychecks in that year unless you elect otherwise. Also, because the maximum Catch-Up Contributions limit may increase in future years, your total Catch-Up Contributions dollar amount may also increase depending upon your election percentage and whether or not you can reasonably expect to be eligible to make such contributions in that year. Please note: If you are a new enrollee in PESP, you will reach age 50 or older during the year and you would like to elect Catch-Up Contributions, you must wait one day after you elect Before-Tax or Roth 401(k) Contributions before initiating the Catch-Up Contributions election. Your After-Tax Contributions You may contribute any whole percentage from 1% to 50% of your Eligible Earnings on an after-tax basis, subject to Internal Revenue Code limitations. If you choose to make Before-Tax, Roth 401(k) and/or After-Tax Contributions, the most you can contribute is a combined maximum rate of 50% of your Eligible Earnings, subject to Internal Revenue Code limitations. When you contribute to PESP on an after-tax basis, your contributions are made with money that has already been taxed. Therefore, you will not pay federal income taxes on your After-Tax Contributions (including any after-tax Rollover Contributions) when they are distributed to you. However, you will pay income taxes when you take a distribution of any related investment results from your After-Tax Contributions Account. It Pays to Start Saving Early According to many experts, the first rule of saving is start now. Generally, it is better to start small if you have to, but remember that every day counts. A small amount saved now can exceed a large amount invested just a few years later because of the potential for growth on your investments. Here s an example of how it can pay to save early: An early saver, Emma starts saving right away with a $50-per-week contribution and stops after 10 years for a total amount of $26,000. A late saver, Joe starts 10 years later and contributes the same weekly amount as Emma, but for 20 years for a total amount of $52,000. As you can see from the chart below, over a 30-year period, Emma s $26,000 of savings grows to about $150,000 while Joe s $52,000 over 20 years grows to only $110,000. Even though Emma saves $26,000 less than Joe, she still comes out $40,000 ahead of him. The Prudential Employee Savings Plan Page 8

19 Dollars Saved $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 Emma - Early Saver Joe - Late Saver $40,000 $20,000 $ Years The moral of the story: The earlier you start saving, the smaller the amount you will have to save to reach your goal because your money has more time to grow. This example is based on a hypothetical rate of return of 7% annually, compounded monthly. It is for illustration only and does not reflect actual returns of a particular investment (which may fluctuate) or the effects of income taxes. Your Rollover Contributions You may be able to roll over certain cash distributions into PESP from an Individual Retirement Account (IRA) or another Tax-Qualified Plan, including an eligible rollover distribution from another eligible retirement plan under Internal Revenue Code Section 402(c), as follows (all numbers below refer to sections of the Internal Revenue Code): A 401(a), Roth 403(a) or 401(k) plan, including After-Tax Contributions; A tax-sheltered annuity 403(b) plan; A governmental 457(b) plan; A Simplified Employee Pension (SEP) plan; Your benefit under the Cash Balance Formula, Traditional Pension Formula and PSI Cash Balance Plan Component of The Prudential Merged Retirement Plan, if applicable; and An IRA or another Tax-Qualified Plan for surviving Spouses (including alternate payees under a QDRO) who are Employees eligible for PESP. All Rollover Contributions are non-forfeitable. Amounts rolled over into PESP will be credited to your accounts as follows: All after-tax distributions, except Roth 401(k) distributions, that you elect to roll over into PESP will be credited to your After-Tax Contributions Account and will be treated like any other PESP After-Tax Contributions. Roth 401(k) distributions that you elect to directly roll over into PESP will be credited to your Roth 401(k) Rollover Contributions Account, and will take on the Roth start date of your Roth 401(k) account with your prior employer. The Prudential Employee Savings Plan Page 9

20 Before-tax Rollover Contributions will be credited to your Rollover Contributions Account. In other words, the funds you roll over into PESP generally will be grouped with other PESP Rollover Contributions, unless they are after-tax or Roth 401(k) Rollover Contributions. For example, if you roll over an eligible rollover distribution of before-tax money from a former employer s 403(b) plan into PESP, it will be combined with other PESP before-tax Rollover Contributions and will no longer be treated as 403(b) funds. By directly rolling over an eligible rollover distribution to PESP, you can continue to defer federal income taxes on the taxable amount of this distribution until you receive a distribution of these funds from the Plan. If you roll over after-tax contributions to PESP, these contributions will not be taxable when distributed from PESP and the earnings on these contributions will grow tax-deferred until distributed from PESP. You do not need to be actively contributing to PESP to make a Rollover Contribution to the Plan. However, certain restrictions apply to Rollover Contributions: To roll over into PESP contributions you made on a Roth 401(k) or after-tax basis under another qualified plan described in Section 401(a) or 403(a) of the Internal Revenue Code, you must do a direct rollover. This means that the funds must be paid directly from the other qualified plan to PESP. Any direct rollover should be made in the form of a distribution check, made out directly to PESP on your behalf. Note that even if your distribution check is mailed to you, it will still constitute a direct rollover as long as the distribution check is made payable to PESP, for your benefit. If you do not do a direct rollover (that is, the distribution check is in your name instead of PESP), you may roll over only the taxable portion to PESP (Roth 401(k) and after-tax funds must be rolled over directly into PESP from the other Tax-Qualified Plan). To be eligible for continued favorable tax treatment, before-tax funds must be rolled into PESP generally within 60 days after the date you receive the payment from the other qualified plan. Under federal law, your former employer s plan may be required to withhold 20% federal income tax from the taxable amount being distributed to you. However, if you complete the rollover within 60 days, you are entitled to roll over the full taxable value of your distribution (including the amount that was already withheld for federal income taxes). If you opt to make up for this withholding amount from your own savings, you may be eligible for a tax refund when you file your federal income tax return for the year in which you received the distribution. If you do not roll over your distribution within 60 days after receipt, generally, you will not be allowed by law to roll over the funds, and you will be taxed on the distribution. Only cash may be rolled over into PESP (for example, direct rollover distribution check, personal check, money order, etc., but not securities). You cannot roll over money into PESP from a SIMPLE IRA, a Roth IRA or a Coverdell Education Savings Account (formerly known as an Education IRA). Please note: IRS Circular 230 disclosure: Neither Prudential nor its representatives are authorized to provide tax or legal advice or financial advice on behalf of the Plan. Any tax information provided is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. You are encouraged to consult with your tax, financial and/or legal advisors for advice regarding your particular situation. If you are interested in making a Rollover Contribution from an Individual Retirement Account (IRA) or from another Tax-Qualified Plan, you must obtain a PESP Rollover Acceptance Form. Please call PRU-PESP ( ). If you want to make a Rollover Contribution to PESP from the Cash Balance Component of the Merged Retirement plan, there is a two-step process. First you must contact the Prudential Benefits Center at PRU-EASY ( ) to obtain a Benefit Commencement Package, complete the Benefit Commencement Form included in the package and return it to the Prudential The Prudential Employee Savings Plan Page 10

21 Benefit Center. Second you must obtain the Prudential Employee Savings Plan Rollover Acceptance Form, available by calling PRU-PESP ( ), and return it to Prudential Retirement PESP Team. Company Matching Contributions Each payroll period, Prudential matches 100% of your Before-Tax and/or Roth 401(k) Contributions to PESP (other than your Catch-Up Contributions), up to a combined maximum of 4% of your Eligible Earnings for that period (subject to Internal Revenue Code limitations). For example: If Your Eligible Earnings Are: And Your Combined Before-Tax and Roth 401(k) Contributions Are: Then Prudential Contributes: $65,000 2% $1,300 2% $1,300 $65,000 4% $2,600 4% $2,600 $65,000 6% $3,900 4% $2,600 Any Company Matching Contributions you receive are credited to your PESP account in two parts. One-half will be credited to your Company Matching Contributions Account 1 and one-half will be credited to your Company Matching Contributions Account 2. Who Is Eligible to Receive Company Matching Contributions If you are enrolled in PESP and you are making Before-Tax and/or Roth 401(k) Contributions, you will receive Company Matching Contributions beginning with the first pay period after your one-year anniversary with Prudential. If your one-year anniversary date falls in the middle of a pay cycle, the Company Matching Contributions will be effective with the next applicable full pay period. All prior Prudential service will be taken into account for purposes of determining when you meet the one-year Company Matching Contribution eligibility requirement. Generally you receive service credit for periods of Employment with Prudential or its affiliates, and certain periods of Employment with an entity before it becomes an Affiliate (subject to the terms of the contract governing the transaction). Please note: If you were actively employed by Prudential any time prior to January 1, 2004 or you were re-hired after having worked for Prudential any time prior to January 1, 2004, you will receive Company Matching Contributions starting with your first full pay period after enrollment into PESP. How Company Matching Contributions Are Invested The Company Matching Contributions credited to your Company Matching Contribution Account 2 will be invested automatically in the PFI Common Stock Fund. The Company Matching Contributions credited to your Company Matching Contribution Account 1 will be invested according to your current investment allocation selections. However, if you did not make an investment election, contributions made to your Company Matching Contributions Accounts 1 will be invested in the Plan s GoalMaker portfolio designated as your Qualified Default Investment Alternative. See Qualified Default Investment Alternative (QDIA) on page 26 for more information. Generally, there are no restrictions on transferring Company Matching Contributions from the PFI Common Stock Fund to any of the other available investment options available under PESP. However, please see Restrictions on Transactions in the PFI Common Stock Fund beginning on page 40 for information on insider trading restrictions, as well as restrictions on Section 16 Officers and Designated Persons. Unless otherwise determined by the most senior vice president responsible for corporate human resources at the Company, Prudential will deliver the Company Matching Contributions as soon as administratively practicable after the end of the payroll period of the contributions to which they relate. The Prudential Employee Savings Plan Page 11

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